Prime Minsiter George Papandreou and opposition leader Antonis Samaras have
reached agreement on a new coalition government for Greece.

The agreement came after the two leaders held talks with the president in an effort to break a political deadlock and thrash out a deal for a national unity government demanded by the country's European partners.

A presidency statement said they will meet again on Monday to discuss who would lead the coalition government, but that Papandreou would not lead the new administration.

George Papandreou, the Greek prime minister, cleared the way for his resignation by scheduling a three way meeting with Antonis Samaras, leader of the conservative opposition, and the president to overcome sticking points over the leadership and duration of the unity government.

A seven point plan for the new government was thrashed out at a cabinet meeting of socialist government. It included a deadline for parliament to ratify the eurozone bailout before the end of December.

Mr Papandreou told the cabinet that the country would be presented with a new government within hours and that he would vacate office soon after. The interim government, led by technocrats, will run the country until a general election is called, probably in the first half of next year.

"It is clear that this government will pass the baton but it will not pass it to a void - it will pass it to a new government, if we agree on it, and I hope this will happen soon. And when I say soon, I mean today, not tomorrow," he said in the text of remarks to his cabinet, released to the media.

"I'm not interested in being prime minister in the new government."

Papandreou also told his cabinet elections should not be held before February or March, after a euro zone bailout is approved by parliament.

Behind the scenes the main figures in Greek politics were under direct pressure to produce a ‘national salvation’ government from Brussels, Berlin and Paris. Mr Samaras was forced to deny that he had been telephoned by Chancellor Merkel with a demand that he sign up to the pact by morning.

President Karolos Papoulias warned that the wrangling between party leaders was increasing the misery of a population battered by budget cuts and a collapsing economy.

"This uncertainty that is torturing the Greek people must end. We must find a solution," President Papoulias said before meeting Mr Samaras.

But Mr Samaras stuck to his position that Mr Papandreou gives up the prime minister post.

"I am determined to help. Provided that Papandreou resigns, everything will take its course," he said.

There were reports last night that Loukas Papidimos, a former central bank governor, was flying back to the country from Frankfurt to lead the interim government.

Evangelos Venizelos, Finance Minister, is likely to take a senior post in the coalition as the main interlocutor with the eurozone.

Mr Venizelos is to lead the Greek delegation to the finance ministers meeting in Brussels today where he is expected to outline the national consensus platform on implementing the 130 billion euro bailout deal agreed last month.

That deal to save Greece from bankruptcy will impose fresh austerity measures on the Greek economy and is the first step in staunching the crisis spread to larger economies, Italy and Spain.

Pressure on the politicians from the church and business added to the sense of national crisis. Constantinous Michalos, head of the Athens Chamber of Commerce, said the stalemate needed to be broken by the end of Sunday, warning otherwise of dire consequences when the financial markets open again Monday.

"A solution is required immediately otherwise the country risks finding itself out of the eurozone tomorrow," he said. "There is no room for political jockeying. The country needs a new government tonight."

Olli Rehn, European Economic and Monetary Affairs Commissioner, echoed that message saying it was essential that Greek unity government restored confidence in the markets before the opening bell this morning.

"We have called for a national unity government and remain persuaded that it is the convincing way of restoring confidence and meeting the commitments," he said. "We need a convincing report on this by Finance Minister Venizelos tomorrow in the Eurogroup."